A perfectly competitive widget firm has this long run total cost equation: LTC = (½)q³ – 6q² + 40q %3D a. Find the long-run marginal cost curve (LMC) and the long-run average cost curve (LAC) and their minima. The firm's long-run supply curve (LS) is the LMC curve above LACmin- 2 Q laQ+ 40 t02-6Q+40O LMC = LAC = 3Q LMCMIN = at qM = LACMIN = at qa = %3D %3D - b. Complete the table at left to find some points on the firm's LMC and LAC curves. Then complete the table at right to find, for levels of output at which profit is nonnegative in the long run, the average and total profit associated with various quantities supplied. LMC LẠC qs P- LAC Profit 3. 6. 9. 9. 10 10 12 12 15 15 18 18 21 21

The following graph plots the marginal cost (MC) curve, average total cost (ATC) curve, and average variable cost (AVC) curve for a firm operating in the competitive market for snapback hats. COSTS (Dollars) 100 100 80 90 80 20 70 70 HD 50 40 30 20 0 11 D 10 O MC Price (Dollars per snapback) 15 15 20 25 55 70 85 201 ATC 0 D AVC O 50 60 70 80 QUANTITY (Thousands of snapbacks) For every price level given in the following table, use the graph to determine the profit-maximizing quantity of snapbacks for the firm. Further, select whether the firm will choose to produce, shut down, or be indifferent between the two in the short run. (Assume that when price exactly equals average variable cost, the firm is indifferent between producing zero snapbacks and the profit-maximizing quantity of snapbacks.) Lastly, determine whether the firm will earn a profit, incur a loss, or break even at each price. □ Quantity (Snapbacks) BO 100 ▼ On the following graph, use the orange points (square symbol) to…

Table: Total Cost for a Perfectly Competitive Firm Quantity per Period Total Cost $10 16 20 22 3 4 24 25 27 30 6. 34 39 9. 10 45 (Table: Total Cost for a Perfectly Competitive Firm) Suppose there is a price of $3.00. If this firm is behaving optimally, it will: O shut down in the short run, shut down in the long run O produce in the short run, shut down in the long run O shut down in the short run, produce in the long run O produce in the short run, produce in the long run

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2. The S.G. Allen Fabric Company sells cotton fabric in a perfectly competitive market at a price of $4 per yard. Its marginal cost, average variable cost, and average total cost curves in the short run can be seen below: Ł price 4 MC AVC ATC d=MR q Find the profit-maximizing level of output and mark it q*. Shade in the area of profit earned by the firm. Is it positive or negative? Should the firm continue to operate in the short run? Show the short-run supply curve for this company.

Graph the long-run supply curve for this market, with specific numbers on the axes as relevant

4. A printer paper manufacturer sells its highly standardized product in a perfectly competitive market, at a price of TL50 per box. The firm has a fixed cost of TL30. Fill in the following table and indicate the level of output that maximizes profit. Determine how the profit-maximizing choice of output would change if the fixed cost increased from TL40 to TL60? More generally, explain how the level of fixed cost affects the choice of output. Output (Units) 0 1 2 3 4 5 6 Total Revenue (TL/unit) Total Cost (TL/unit) Profit (TL) Marginal Revenue (TL/unit) Marginal Cost (TL/unit) 50 20 30 42 54 70

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34) Assume a perfectly competitive market for blueberry in lower mainland BC. The graph shows the cost structure of a typical blueberry farmer. If the competitive price is $12 per unit (one unit = a 10 lb box), Price and cost (dollars per unit) MC 20 ATC 16 AVC 12 8 4 5 10 15 20 25 30 35 40 45 5o Quantity (units per day) A. The market is in long-run equilibrium and the farmer makes zero profits. B. New firms will enter the market in the long run. C. Some of the firms will leave the market in the long run. D. The firm is in a short run equilibrium and is making a positive profits. E. The firm will produce 40 units.